Read the episode transcript
Aaron (00:00)
Hello everybody and welcome to the speaking of insurance podcast. My name is Aaron Bollinger.
Brian Bollinger (00:04)
And I'm Brian Bollinger.
Aaron (00:06)
Today we're going to be talking about natural disasters and their effects. currently on Governor Newsom's desk are 10 bills that are related to California property insurance primarily to help make amends for the poor claims handling and whatnot that has happened after the Eton Palisades fires in 2025. Starting off, though, currently in Hawaii, there is a hurricane right going through. And our trip to Kauai has been.
Aaron (00:34)
Postpones, cancel.
Brian Bollinger (00:35)
Postponed.
Brian Bollinger (00:36)
Postponed. Yeah. Well again, it's already kind of passed through. The damage is way worse than people were hoping, obviously, and we're sorry that people were impacted by it. obviously a vacation is not that big a deal in the scheme of the world. you know, we knew we're on the edge of the season, but we thought we were just past the peak and we thought, sure, why not? So it's interesting though to think like how much those insurance claims might be, you know, how they're gonna have to get everything regrouped back going.
Brian Bollinger (01:03)
kind of reminds us too the importance of like business interruption. I was talking to a lady out there. She runs a small kind of concierge kind of company for one of the boat resorts out there. she has like car rentals, she does a lot of the bookings and stuff out there. And you realize that that that storm going through has really decimated her business probably for the next three months. I mean it's not like it's a one day thing. she said she didn't lose any cars, but it sounded like the water got a couple feet into the parking lot.
Brian Bollinger (01:32)
so you know, there could still be some issues with the brakes and those kinds of things from the salt water hitting it. so again, it'll be interesting to see how it all plays out, but a big reminder that that insurance does play a role in everybody's business and lives.
Aaron (01:45)
Hundred percent devastating. obviously I think so today we're gonna be focusing a little bit more on those ten pending bills, but obviously it's important to understand that in this world we do not control the weather. We do not control what happens all of the time. And so a part of that is just coexisting with nature and understanding that you're not in control. And so that's that's one of the reasons why we're insurance brokers is to help people feel a little bit
Aaron (02:10)
of a sense of security. Obviously there's no such thing as a full sense of security, but understand to be able to put that, you know, head on the pillow at night and know that hopefully your assets and your home and your family are all protected properly because that's that's devastating what's happening there, devastating what happened in 2025. And obviously we're still dealing with the side effects of that and the you know repercussions. let's start though, obviously there's gonna be a live reaction for you, Dad, because you're you're up to date on all the all the politics, but you know
Aaron (02:39)
Not the insurance politics.
Brian Bollinger (02:40)
Nope, not so much. I
Brian Bollinger (02:41)
I just do my job and try to stay in my lane and it's even like the insurance policies, right? The courts make some decisions that are crazy. I'm just here to try to serve the clients and try to make sure that the policy is the best we can get.
Aaron (02:53)
You're doing so very close up to the camera as well, Brian, dare I say. you know, right right up in our faces. So we we appreciate you and your help for our insurance getting up in our business. let's start off with SB eight seven six though, Disaster Recovery Reform Act. First off, what what do you think about the name? Disaster recovery reform act.
Brian Bollinger (03:13)
I think it's a great name. Like I think it's gonna make everything better. Like it's gotta be good.
Aaron (03:18)
Well, it it not all legislature is good. th this this might intend to be good. I bet a lot of these intend to be good, but obviously there's gonna be holes in everything. the basic idea of this though is that it gives people stronger protection after a catastrophic sort of incident and put more consequences on insurers for mishandling claims.
Aaron (03:39)
and so it says that it would double regulatory penalties for claim settlements violations during declared emergencies and require restitution directly to policyholders harmed by vol violations. It also addresses delays caused by repeatedly changing adjusters and expands certain recovery protections. That that does sound generally positive though, right?
Brian Bollinger (04:01)
Yeah, I think the challenge with it is, right, it's kind of like these big companies, right? They're they're very large companies. after a big disaster, they tend to fly in a bunch of claims adjusters from around the country, right? I mean, if it's like a hurricane in Florida, all the adjusters go to Florida. If it's California, they all go back to California. So, I mean, it's like this tide of people that are trying to help, theoretically. my my suspicion is
Brian Bollinger (04:28)
That they're gonna use more AI, they're gonna use more kind of analytical tools, and they're gonna probably the companies, insurance companies will respond in a different way than I think that the government is trying to regulate right now. but again, I'm not saying that it's gonna be good or bad on either side. I do think though that the cost of claims handling is already pretty high. I know there's a lot of pressure after disaster two for these insurance companies and reinsurance companies.
Brian Bollinger (04:54)
I don't want to say to slow pay the claims, because that makes it sound like it's a conspiracy, and I don't believe in that, but I'd say obviously they can't just write huge checks to everybody at the same time. And because there is some fraud that does sometimes occur, you know, in the defense of the insurance company. however, my belief is more often than not, they they tend to deny claims that are legitimate or or what do they call it, delay, deny, defend. I mean, I think we heard that that story a lot in the group medical insurance and health insurance industry.
Brian Bollinger (05:24)
But you know, delaying the, you know, handling, denying the claim, and then defending it, you know, at the end of it, there does need to be some kind of repercussions for that or some kind of cost. I know we've worked with a number of our clients after some of these disasters, trying to help them kind of position themselves to get the best outcome for themselves. I remember even before that, there was a neighbor we had that lost a house and State Farm was their insurance company. you know, he
Brian Bollinger (05:50)
He wasn't able to fully rebuild this house. He was debating where he was going to go. you know, but his his challenge was is he wasn't very organized. And I think that, you know, when you're dealing with an insurance company post-claim, I think we did a video on this a while back. It's really important that the insured be very, very organized and, you know, consult, you know, some kind of support.
Aaron (06:11)
Happy that he had you to consult. your plethora of experience obviously it was definitely beneficial. one other thing that I think would probably get swept under the rug in terms of the bill. I guess you call it a bill SP. is that it also requires insurers. This this is a really big one. It requires insurers to offer at least 50% extended replacement cost coverage for dwelling and additional living expense. I I think that obviously the the first thing that people are gonna see when they look at this is the the double.
Aaron (06:41)
on the regulatory penalties for claims mishandling for the insurance companies. But honestly, 50% we call it ERC here, extender replacement cost. A lot of insurance companies limit it to zero to twenty-five, but
Aaron (06:54)
It that is a colossal thing that everybody needs to have on their property. Just a reminder that I think around seven out of every 10 homes in the Palisades were underinsured in terms of their coverage A. So their rebuilding costs, whether they were on an actual cash value or replacement cost, they weren't actually properly insured in terms of the valuation of their home.
Aaron (07:16)
What ERC does is obviously when a huge natural disaster happens in the Palisades and the costs of construction go up, extended, you know, an extra 50% buffer on top of that limit, very cost effective. It's not like the same thing as increasing it by a million dollars. It's probably maybe 25 to 10% of that actual cost to add that. And it's definitely an excellent thing that everybody
Aaron (07:43)
Everybody that's a homeowner or property owner should 100% have is firstly a replacement cost valuation. And then secondly, that 50% extended replacement cost definitely take advantage of that. Any any comments on the 50% ERC?
Brian Bollinger (07:57)
Yeah, I think the challenge with ERC, right, or any of these added coverages that are super cheap, it's that they tend to get abused and they have to be re-rated. And it's like we've seen it on the personal auto side with the uninsured, underinsured motorist crisis in California. The number of c people driving on the roads that don't have enough insurance. And so you're essentially forced to buy insurance on every crazy person that can hit you, which is what we tell of our clients to do, and we do it ourselves. you know, you really want to have a million dollars or more.
Brian Bollinger (08:26)
coverage in case they really harm you or your family. you know, obviously be defensive with your driving. But we've seen those payouts be huge. I mean, we've had clients get the seven figure checks and, you know, it's horrible when that happens 'cause it's not like it's joyful because they got the money. But if they hadn't had that coverage, you know, the family would have been w in way worse shape. and so it it's that kind of a thing, I guess.
Aaron (08:53)
Definitely very similar to life insurance. I'd say with the the home side of things, when you do have to file that claim, it's obviously a horrific thing, losing your home, losing a loved one, but it's the people that benefit from it. And obviously it's it's worthwhile to be able to rebuild your home as opposed to just get some cash for what the value of the property was minus the land, which is what the actual cash value is limited to. As a matter of fact, the next one, SB 878, I know they're really unique in terms of these names. This one is.
Aaron (09:23)
Is referred to as faster insurance claim payments. And so in the event of a total loss, this would require insurers to pay the homes actual cash value within 30 days, subject to limited exceptions, of course. But I have a few questions on this one. Do you think that this would be even for homes written on replacement costs, that they would have to pay out that minimum actual cash value? Or do you think that this is just for properties that are written on actual cash value?
Aaron (09:53)
that they would actually have to get that full payment because again, it would make sense if if the people who it should go both ways, right? It should be people on actual cash value get the cash value of their home within 30 days on it in the event of a total loss. Same thing with the rebuild, but I I doubt it's that way.
Brian Bollinger (10:08)
Yeah, I don't I don't know, 'cause the way the insurance contract is written for a lot of that stuff is you actually have to incur the expense before you get the full replacement cost. You don't just no or automatically get that full replacement cost. And again, if it's a one off event, we had a fire in in on Mulholland Drive about a decade or so ago and there were a couple of insurance companies that just went in there and wrote full fetch checks for everything and it was done, right? People got the big check.
Brian Bollinger (10:33)
The issue that I think people don't realize when they have a loss on their primary residence, they think, I'm gonna get this big fat check, it's gonna go in my bank account, I'm gonna be rich. That's not how that works, right? Let me be clear. The bank gets the money first. You know, if you've got a mortgage on your property, they have that first, you know, loss payee position. They get the money. It doesn't really come to you as the, you know, actual beneficiary in that regard. Might be in both parties' names. It can be a little tricky, that kind of thing, but but the issue is
Brian Bollinger (11:03)
you know, we're I don't think people understand that. the second thing is in California, you know, even if you were it to be able to rebuild in your house like the Palisades people are finding, it can be years down the road. It's not like it's two weeks and you got a new house. what we are seeing some people being able to take advantage of is buying a home somewhere else or building a home somewhere else. And so we're seeing that there are these other kind of opportunities. there was a fire in Monterey.
Brian Bollinger (11:31)
Up in that area, you know, I want to say about five, ten years ago also. And that seemed to be an easier thing for the insurance companies to do. And what I'm trying to say here is when it's three homes, you can do that. Okay. When it's 3,000 or 10,000 or 20,000 or God knows what number we're talking about here, all of a sudden now it's not the insurance companies that are ponying up the money, it's the reinsurance companies that are ponying up the money.
Brian Bollinger (11:57)
And it does create a little bit of an issue with how to manage all of that. I get the intention, I understand it. I think it's more important after a loss, personally, that that the people receive, you know, their actual, you know, living expenses covered, right? That they get them a a replacement home to live in or they they you know, given that you know
Brian Bollinger (12:20)
cost to put them up in a hotel for a week or a month. Like they they just bring out the corporate Amex and they and they book hotels for people. I think that's going to be more beneficial for people. Again, I see this as like protecting banks, not not people, but that's just my my perspective.
Aaron (12:36)
Interesting. I think the big takeaway from that really, what what you were talking about is the fact that they only pay the rebuild cost or replacement cost out after they're done rebuilding or during that process. And so you can't really determine how much the payout's going to be until after versus the actual cash value. It's it's fairly simple to estimate, you know, this property is worth X, Y, and Z, the construction is worth X, Y, and Z. This is our anticipated total cost for the actual cash value valuation. And so it's it's very important, I would say to get
Aaron (13:06)
Clarity on exactly what this entails because again, if your home is insured excellently and you have extended replacement costs and replacement cost valuation, this could very well not apply to you. You could not be entitled to that 30-day immediate payout subject to exceptions. I'm thinking that the exception could be if you are written on replacement costs. So really getting into the details, obviously that this hasn't been passed yet, so we're not sure we can talk about it in future podcasts, but this could be either revolutionary for people.
Aaron (13:34)
Or really harmful because people who are written on improper policy forms, actual cash value valuations, could get that immediate check, be super happy and grand, then realize that it costs three times the cost to rebuild their house. And then the people who want to rebuild their house couldn't do so, like you say, because of permits and because of company insurance company payouts for years, like we're seeing in the Palisades. I don't want to dwell on this one too much. Obviously, I mean
Brian Bollinger (14:00)
But just one more
Brian Bollinger (14:01)
one more point I think is important to add here too. The actual personal property, you know, the actual content coverage, if they were to pay that out, I I'd be more excited about it personally, because that's actually owned by you. That's not owned by the bank or the mortgage company. So again, again, my my view is a lot of people out there do have mortgages on their properties. The banks are gonna tie up that money. People think that it's gonna come to them, but again, it's not. So that's that's just my kind of take on it.
Aaron (14:27)
Great, great take. I I really like that take. I think that that was very insightful, like the the back and forth there. So so thank you for that. next one is A B. So we've switched from S B to A B. A B one seven nine five. That's the year you were born, right, Dad? Nineteen seventy-five.
Brian Bollinger (14:44)
Yeah, we don't disclose ages on this show or a family program here.
Aaron (14:48)
You're you're like a fossil or something, I guess, maybe. obviously I'm just okay. This is the smoke damage recovery act. And so we've talked about in prior podcasts on my TikTok, I've talked about this. a lot of people seem to be like really interacting and and feeling the pain of the people in terms of the the smoke damage related claims. It's it's a really big thing, it's very controversial.
Aaron (15:08)
I mean, State Farm's name is up there. We don't want to go into, you know, specific insurance companies going at them, but in general, it's been really hard for insurance companies to pay out the smoke damage related claims, get those adjusters in there and determine the actual amount that people are entitled to. It's also been really hard for people to occupy their homes in these areas because of the lingering smoke damage. We have a few people that we know who who still are you know, dealing with the the side effects and the negative effects, some close friends.
Brian Bollinger (15:35)
Just recently
Brian Bollinger (15:36)
one of a couple of our friends and and family members and and clients have been able to get back into their homes, you know. I'm thinking of one or two people in particular. One one of the issues they really had with these smoke damage claims, historically people had fireplaces in their houses and, you know, a little smoke particle here, a little smoke particle there, whatever, right? Not the end of the world from my perspective, obviously not helpful, but that's just, you know, how people lived for a long time. I think the bigger issue now is we have a lot of the like lead-based paints.
Brian Bollinger (16:04)
There's a lot of chemicals in these houses that we're burning. obviously the number of chemical compounds that that a house emits during a you know a fire is is probably immeasurable, honestly. But what's even worse than that is now we have electro EV vehicles, right? A lot of electronic vehicles, they've got the lithium ion batteries, they've got a lead like cobalt, you've got lead acid batteries that are burning, you've got just so many chemicals and and minerals and elements and heavy metals that nobody really knows what's being emitted.
Brian Bollinger (16:33)
during these fires and I've actually had some clients go in, they had an independent adjuster, but they swab the floor. They had this beautiful kind of like mosaic tile entryway and they they tested the dust and the dust had a lot of heavy metals in the palisades.
Brian Bollinger (16:48)
and so they wanted to have a hazmat crew come in and clean it and then retest it to see if they could get the heavy metals out. you know, it required wiping, vacuuming, it required, you know, a whole bunch of processes, sealing, that kind of stuff to really try to encapsulate it and and minimize the risk. I think in this case it was triple A that I'm thinking of. and they had an independent adjuster and they were fighting around around on how to how to mitigate that. I remember another person was talking about it, and they were like, Well just go in there and wipe it up, you know.
Brian Bollinger (17:16)
and and not worry about it. And they're like, well, but this has heavy metals in it. We've tested it. We know it's unsafe. you know, so they wanted to bring out an actual hazmat remediation crew and, you know, again, completely vacuum the area, you know, swipe it down, wet mop it, like really get a deep clean on it to get as much of that junk up as they could. and the insurance company wanted to pay for the extra, you know, cleanup expense. So these are real issues. And to be quite honest,
Brian Bollinger (17:44)
I don't think the insurance companies have ever had an experience with with this kind of level of pollution. I think what they're really good at doing is dealing with hurricanes in Florida, right? Tornadoes, we understand that. Fire is a whole nother thing. And these massive fires that we've had, you know, throughout the last decade or two, have really been a challenge, I think, for the industry to adjust to. So I see this as more of a growing pain and understanding of like what the actual exposures and risks are.
Brian Bollinger (18:13)
And I think slowly the industry will will get, you know, acclimated to it and get their act together.
Aaron (18:20)
One can hope, what one can hope that the industry will get its act together because obviously it's it's it's a triangle. It's three three parties that are really getting the bare end of the stick. The insurance companies with their profit margins, the insureds with their claim payouts and experiences and the poor customer service that some of these companies are providing, and then the insurance brokers who are just trying to find the best deal for their clients and are finding it very hard to properly advise them with the either limited or
Aaron (18:49)
you know, excessive amount of options that are out there, depending on the case and the property and the the ultimate shopping that that does happen between all of the
Aaron (18:58)
You know, different people. let's go back to the Smoke Damage Recovery Act. This this one it it's attempting to create a framework, is what it's saying for wildfire smoke claims involving homes that are still standing. So your home doesn't have to be fully burned down to the ground for it to s sustain significant damage that requires some serious repairs. it would make insurers responsible for testing, sampling, establishing inspection timelines, create a presumption connecting qualifying smoke contamination within a wildfire empty.
Aaron (19:28)
Impact zone to the wildfire and protect qualifying additional living expense coverage until the property has been restored and cleared for occupancy. So that that does sound generally positive. Again, it's interesting how they're going to zone that out, determine the areas that do get that sort of high-level treatment for the automated testing and the qualification of smoke contamination, because I would like to see that be just a universal thing.
Aaron (19:55)
Right, like, every single insurance company abides by this smoke contamination threshold. But likely in all likelihood it'll be that different insurance companies interpret the smoke damage differently and pay out differently. it would be good though and and nice if if there was a a sort of, you know, again, a framework that all of them.
Brian Bollinger (20:13)
Well that's what they're trying to do. They're trying to establish
Brian Bollinger (20:15)
a framework. They're trying to create, you know, a measurable yardstick that everybody can utilize. I think that's the other issue, right? These insurance contracts are written by the insurance companies, right? The the insured buys them, you know, agents and brokers try to help distribute them. And and then at the end we try to help, you know, be the grease in the machine to get the client back in their home. I mean, that's the other challenge with some of these things. Some of these things do tend to kind of drag out for longer periods of time.
Brian Bollinger (20:41)
It's questionable some of them may or may not be totally necessary or needed. And there is always a question is compared to what? You know, how clean can you get it? You know, compared to what? What level of rebuild should you have to do? Do you have to repil re you know, repaint the entire house? you know, your grandfather had a fire claim in his house and he had I think it was triple A at the time, or maybe a CIG, I forget. At any rate, but they they decided to repaint, right? They they cleaned out the ductwork, they had to replace the AC in general, there were some other issues.
Brian Bollinger (21:11)
They decided at the time just to, you know, fix it all up. But you know, the idea of repainting, because they had a lot of smoke that got through the air conditioning system. The person, it was a tenant in the house, they turned on the AC, you know, in the midst of a of a fire or smoke, and it just blew black smoke out all the vents and it was just streaking on the wall. They tried to clean it, but it soaked into the paint. It just and the smell wouldn't go away. And so there are these things you run ozone, you do certain things to try to mitigate it.
Brian Bollinger (21:40)
But at some point you get to the you know, this this issue of there is residual smoke, you can smell the residual smoke, you can see the smoke damage. that's I think easier for people to understand. We're just putting paint on it. I think one of the challenges with these big Palisades fires and in L T and L than things we've had is that heavy metal contamination is is really a concern.
Aaron (22:01)
100%. I
Aaron (22:02)
I would definitely agree with that. It's one of those things again that get kind of pushed to the side in terms of the priority. You look at the the other sort of claims that are happening with the bigger payouts, and it's not really considered as much as it probably should be. One of the companies though that does have or that is getting the bear into the stick is the fair plan. they are having a bill passed separately for them. hopefully not passed yet. A B sixteen eighty. So is that the year that you were born?
Brian Bollinger (22:32)
Of course, of course it was, yes, sixteen eighty. Mm.
Aaron (22:34)
Interesting. How old does that make
Aaron (22:35)
you? I'm sure maybe wiser than the fair plan, because they they have to have an act that is make it fair act. It's the make it fair act. this one is the one that's obviously very relevant to us in this this topic. the broad reform is attempting to improve the fair plan customer service and claims handling, improve transparency, develop three to five year strategic plans, improve programs designed to make policyholders and move them back.
Aaron (23:00)
To the regular insurance market and improving capital in liquidity planning. So again, I think again, just brief overview: the fair plan is supposed to be the insurer of last resort. It has gotten out of control in terms of how powerful and big and influential it has become. It's been intended to be the insurer of last resort, and it is not that in any such way. it was created on
Brian Bollinger (23:26)
Again, it
Brian Bollinger (23:27)
I think the point is, right, the thought just put in percentages, they thought it'd be a rounding error in terms of how many people actually needed it. And right now, I mean, if you check with some of your friends and neighbors, I mean, there's entire areas where they're they are the market and and it was not designed that way. And there's another capacity for that. you know, it's just it's a it's a tough situation really.
Aaron (23:49)
Yep. And so this act attempts to make it a little bit fairer, a little bit more clear. because one of the biggest issues is that the fair plan is actually sticky. And so that's that's a term that we use in insurance, where people who are with the fair plan tend to stay with the fair plan as bad as it sounds. obviously that was not the intention of it. There were supposed to be plans for people to get replaced to the other markets, but due to the fact that the fair plan is ensuring the higher risk homes, the areas in higher brush with worse construction.
Aaron (24:18)
Other insurance companies, whether that's surplus lines or admitted, are still very hesitant to insure those due to how bad the fair plan has had it in terms of its losses. And so it wouldn't be easy for any insurance company to look at the fair plan's properties and say, you're insuring this 1970 house with no electrical updates and a Zinsco panel with wood siding right in the mountains.
Aaron (24:46)
And the fair plan might be insuring it for four to five K, but maybe with the DIC that covers it for liability, three to four K. And then, you know, it's a nice one, two million dollar house, probably in that range on the replacement cost side, hopefully. maybe not, maybe it's actual cash value. Regardless, any insurance company will go ahead and look at that and they will deny you. I I I would bet right now with the California.
Aaron (25:10)
market, they would they wouldn't insure you. If they would, they'd triple the price. It would be an excess company that would triple the price. It would be better coverage and it would be probably ten times the customer service and claims handling and and reliability of an insurance company. And we'd recommend you to go there, but we don't expect you to pay triple the price. and that's the problem is that there hasn't been strategic planning to transfer over. And so I think that's the biggest feature here is the the three to five year strategic plan to get people back into the regular insurance market. That's what we're actively trying to do.
Brian Bollinger (25:38)
They've been talking about that
Brian Bollinger (25:40)
for decades. I mean, it's it's been this has been an ongoing struggle and journey for a long time. I think what
Aaron (25:45)
But
Brian Bollinger (25:45)
we're seeing in the market right now though, right, is that we're seeing so the fair plan, let's say, insures this much of the market for whatever term you want think of. What's gonna happen is the higher risk stuff is gonna stay with the fair plan. That lower risk stuff is gonna basically go back into that preferred market. It's gonna make it so the fair plan actually is even higher risk than it is now.
Brian Bollinger (26:07)
And actuarily speaking, which means their rates are gonna have to zoom to the moon. And I I really think that every change, it's like a teeter totter, right? You you d everything hops on one side. It's it's not gonna be easy. It's it's gonna be a difficult journey, I believe, for them. And they've grown so much. They've added so much staff, so much technology, and so many claims that they're dealing with. Again, it's it's a difficult situation.
Aaron (26:32)
I I would happen to disagree with the statement on the sort of like the T side of things, with the the more higher risk homes being kept with a fair plan and the width being the homes being the lower risk ones that stay. I I would honestly say that there's no no such thing as a low-risk property in California, other than those brand new ones and those nice neighborhoods. Those aren't being insured with a fair plan. I think that almost all of the 90
Aaron (26:56)
plus percent of the homes of the fair plan are higher risk homes. And that even if it's not right next to brush and it just has some construction problems, that those claim susceptibility statistics that we've been referencing indicate that there's really no such thing as as a good property risk that's existing with the fair plan. I think that a cinnamon or ginger might agree in the background.
Brian Bollinger (27:18)
Yeah, I
Brian Bollinger (27:19)
think they're really fired up about the fair plan. They've heard us scream and yell about this and heard me on the phone too many times saying, Please pay the claim. yeah, I actually went to the director of claims for the fair plan for my clients and was like, You guys have to pay this. I mean, there is no way. If you don't pay this, a tree fell in a house and they didn't want to pay the claim. I mean, again, the client didn't do everything
Aaron (27:38)
Yeah.
Brian Bollinger (27:38)
correct. There were some other things, again, it was complicated. They did eventually honor it. They did the right thing. but I mean, that's the other thing, right? I mean, the agent or broker
Brian Bollinger (27:48)
You know, we see our jobs as being the advocate, you know, for our for our clients. And, you know, the fair plan is kind of, you know, making it harder for us to do business with them. You know, on that
Aaron (27:57)
One hundred percent.
Brian Bollinger (27:57)
side, they're they're grinding down the commissions to the point where it barely covers our staffing costs to to work with them, probably losing money. they're they're just really not easy. Which again, it's okay. I mean that's what they're trying to do is create at the insurer of last resort. We actually saw this, I don't know if you remember this 'cause I think you're two years old. there was this
Aaron (28:17)
Like it was yesterday.
Brian Bollinger (28:18)
yeah.
Brian Bollinger (28:19)
there was a situation in California where the amount of workers' comp claims was so high and there were workers' comp carriers pulling out of California and this state fund, SCIF we call it, state fund, they actually were like 80% of the market, 60% of the market. They were just taking tons of market share. And then eventually there were reforms, capping payouts and changing how they were doing things and a whole bunch of other things that went through.
Brian Bollinger (28:44)
any rate, now what we're seeing is, you know, state fund is a smaller percentage. They've shrunk their amount of coverage in the state, and the private companies have ramped it up. Rates have also progressively gone down for most people, almost everybody, significantly, like sixty, eighty percent in some cases. we're now starting to kind of see that go back up. But I think that's what we're hoping for with what's happening in the California property market is that we can get some stability, which I think we're seeing. I mean at a higher price than it should be, but it's it's still there.
Brian Bollinger (29:13)
I think once the profits start to come back and they start to, you know, replenish the the money that they lost, the reinsurance companies, I think the theory is, you know, few years of low fires, maybe we'll see, you know, capacity increase, rates go down, and there'd be more competition in the in the marketplace.
Aaron (29:32)
And and I I would agree that that's the best case scenario. I would say that you can't predict what's gonna happen though. these insurance companies are going obviously off of statistical models and estimates that that they're you know conjuring up from wherever, from other experiences, from you know, their their models. I I would generally say though that it's built on unstable foundations, the entire property insurance market. I would say that the underwriting is too lenient in some areas and too strict in others. I would say that
Aaron (30:02)
you see these homes that are brand new condition, obviously they're still they still have claims and a large part of that is is the liability side, which is super underpriced. but regardless, I I would say you look at your current yearly budget as a person and you say if you're buying a new home, what do I want to spend on X, Y, and Z? If you really don't want to spend a lot of money on insurance, go buy a newer home, go rent a newer home.
Aaron (30:26)
or rent a home in general renter's insurance is absolutely cost effective. it can lower your annual costs out of pocket. obviously for those of you that do want to own a home, newer ones are better for the insurance side of things. But at a high level
Brian Bollinger (30:39)
But they cost more.
Brian Bollinger (30:40)
They have smaller yards, right? And some of those newer homes actually are ri are being built in really like fringe neighborhoods. So they're actually in the brush more than some of the older homes. And so it's it's such a difficult thing to to to figure out the optimal place for everybody to be. but again the goal is for you to go into your tran in real estate transactions, eyes open, know what you're getting yourself into, know the pros, know the cons. again, we've got a whole couple episodes on asking about
Brian Bollinger (31:08)
Condition of the roof, when the plumbing was updated, how the electrical is, you know, these kinds of things, the heating systems, try to make sure that you're getting the best quality home you can. And if you aren't, at least you know like what needs to be worked on and when.
Aaron (31:20)
100%. It turns out that not all ten of them, thankfully, because we're over time, are can you hear that ring? Okay, good. not all ten of them are based on the California property insurance market. It is also separated out. So it wasn't all 10, it was just four of those were big property insurance bills. The other six are for
Aaron (31:42)
Insurers, operations, data, life insurance, and health insurance. So that that can definitely be something that we talk about in that next recording. yeah, so obviously we we've touched on all the bases here. This is a lot of new information. It's a lot of attempted positive change, I would say. it's really just what's it built on? Because you you look at all these changes, they seem positive, but
Aaron (32:03)
Why weren't these happening in the first place? The second that the signs were shown, why weren't these happening in the first place? Why, why was the Fair Plan not properly set up in the first place? And these are the questions and the things that you have to think about as you look at all of these changes. Are these just band-aids? Are these just band-aids to a broken market? Are these just band-aids to profit margins? Are these just things that that you know might right now sound good, but how how actionable are they? How actionable are the smoke-related, you know, holding insurers accountable on the
Aaron (32:33)
Claims payouts. How beneficial will this be in practice to people actually? And that's all that matters. Again, insurance companies, they they've got billions. Our clients don't have billions. Reinsurance companies have billions. They're the ones who are leveraging their bets. The the average people are just people who are who are trying to get by, trying to get a nice home, make sure that it's insured properly. If you're if you're among the
Aaron (33:00)
Upper echelon of people, maybe you're investing in a bunch of different properties, but you've earned that. I mean, these insurance companies, they're deciding to insure these homes. And the state has decided to create a program that automatically insures X, Y, and Z. It's not the people's fault. It should never be the people's fault. And it has been treated as if it's been the people's fault. All of these claims, the way that these companies have gone about the payouts. You talked about how Mulholland drive that fire. Some companies just pay out claims.
Aaron (33:26)
That's that's how it should be. You pay out the claim. I mean, if the price goes up, if the government has to come in, whatever it is, I mean, insurance is one of the backbones of our financial society and our econom.
Brian Bollinger (33:33)
But I again I think and just to be just to be just
Brian Bollinger (33:37)
to be contrarian on this, the challenge is, you know, we go back to how are rates actually set and controlled, right? Admitted markets in California, the C A D O I has to review the rates and approve them. And what that means is if they're projecting a certain loss ratio, like we're gonna lose ten billion dollars or we're gonna make ten billion dollars based on this model, you know, it's it's regulated. You know, the
Brian Bollinger (34:00)
The reality is the rates have been too low in a lot of areas for a long time. And now what's happening is we're we're getting to a point now where I feel like they're too high in a lot of areas. And you know, maybe that's by the CADOI's own design. They're trying to help subsidize people in the higher risk zones with people in the lower risk zones. And and again, it it gets back to that whole premise of insurance. It's not the insurance companies that pay the claims, our clients do, right?
Brian Bollinger (34:28)
Claims are paid by people's premiums. So if there's a bunch of claims being paid out, there's gotta be a bunch of premium coming in. If that isn't the case, the company goes insolvent and that comp and or that company leaves the state. And I think that we've seen that, you know, in the last five or ten years. Quite a few companies do that. I mean, maybe I again I think it's getting better now, but it's not quite the same as it was.
Aaron (34:53)
And and will it ever be is is the real question. And obviously, we'll we'll keep you guys updated on the property insurance market side as news comes up. next podcast, I guess we'll be talking about the six other ones. super exciting. they are also starting with SB. So we're going back to the SBs and the the, you know, one of them just to make people excited about the next podcast is called the Insurance Examination Compliance and Accountability Act.
Aaron (35:19)
So, you know, we feel like we're in school again, you know, doing history lessons about, you know, the the acts that were passed by you know, all of those great government officials back in the day. So super exciting.
Brian Bollinger (35:28)
I think that next podcast
Brian Bollinger (35:30)
is gonna get two viewers. I mean a a name like that, how can we not get two viewers? You know what I mean?
Aaron (35:34)
Well,
Aaron (35:34)
I mean two viewers, what, mom and Emma?
Brian Bollinger (35:39)
Just family members exactly. No. Again, we'll have to mix
Aaron (35:41)
Yeah, no nobody'll it'll
Aaron (35:43)
it'll be a long watch for sure.
Brian Bollinger (35:45)
Maybe other politicians will watch one and hear our opinions and thoughts. Who knows?
Aaron (35:49)
and then we'll we'll get some suits filed against us or something. they they said something bad about the insurance examination count compliance and accountability act. That's IECAA. The most revolutionary
Brian Bollinger (35:59)
Yeah.
Aaron (36:03)
thing in all of insurance. It's it's a very simple concept, and the Department of Insurance examines insurers and can identify things that need to be corrected. Who would have thought? That's a brilliant idea. That's a brilliant idea.
Brian Bollinger (36:14)
I thought they were already
Brian Bollinger (36:15)
doing that though. I think I think there's so many regulations. strengthens, strengthens, okay. Okay. Strengthens.
Aaron (36:16)
It strengthens, it strengthens their ability. So excited.
Aaron (36:22)
Let's do it. Okay. thank you so much for your time, Dad.
Brian Bollinger (36:24)
Like
Aaron (36:25)
For those of you who listened to those last few minutes there, apologies for the you know regressions of conversation, digressions. But no, no, no, you know, it's it's a
Brian Bollinger (36:31)
Maybe we'll cut that. I mean, maybe that won't make it to the final episode. Who knows?
Aaron (36:36)
part of the fun. For for those of you reaching the tail end of your summer here, I hope you guys have had an awesome summer. hopefully no smoke-related claims. If you are dealing with that, please reach out to us.
Aaron (36:45)
Happy to, you know, share some experiences on our podcast, get some other people aware of, you know, client experiences and whatnot. talk to people through, you know, anything. I mean, we're we're here for people as advisors and you know, my my dad over here is the the one with decades of experience. So I'll I'll defer to him.
Brian Bollinger (37:02)
Sounds good. Well, thank you so much for your time, Aaron, and we'll talk next time.
Aaron (37:06)
for sure, for sure, Don.
Brian Bollinger (37:08)
Okay, bye so
Aaron (37:09)
Bye, take care.
